Sky rocket your profit and start big-boy trading with the Chainge Options DEX
Options represent one of the most popular financial derivatives used in the conventional finance industry today & definitely one of the most profitable. If you know how to make use of them they can easily become gold mines providing you with a constant income flow. So, let’s get down to business.
Basics
A call option is a binding contract that allows you (as the buyer) to buy an underlying asset (goods, stocks, indexes, etc.) at a predetermined price within a set time frame, while a put option is a binding contract that allows you (as the buyer) to sell an underlying asset at a predetermined price within a set time frame.
With options, in order to get that right to buy or sell a particular asset at a predetermined price, you have to pay the option seller a price, which is called the option premium.
Options have been until now a tool reserved for specialised traders and institutions. And we don’t think that’s right. So in an effort to offer a fair financial market to all, Chainge built an options market in a decentralized way. An options market that anyone anywhere can access and utilise in order to maximise their wealth’s potential.
How does the Chainge Options market work?
Chainge is providing an inapp form where users can write their own options with a predetermined exercising price.
As long as the option is listed, the smart contract developed by Chainge is going to support writing and exercising options in a decentralized way, which means anyone could inject tokens (eg: XYZ) to write the same amount of call options tokens (XYZ-CO). Thanks to our Futures’ time framing feature which is integrated in the FRC758 protocol, the XYZ-CO token is time framed from the present time to the end of this year. When time is in place, the XYZ-CO token will just disappear.
But anytime before the end of this year, there are 4 things that the holder of a XYZ-CO token can do:
1. He could exercise the call option by injecting back the XYZ-CO token and the corresponding predetermined exercise price in USDT to receive XYZ token.
2. Keep this token in his Chainge app or send it to others in the same way they do with any other tokens.
3. Sell the call option token XYZ-CO in the Options DEX market for the XYZ-CO/USDT trading pair when the user feels the price of XYZ-CO is good enough
4. Add liquidity to the Options DEX market in the XYZ-CO/USDT pair.
With put options things are vice versa. Anyone can inject USDT to write corresponding put options for the XYZ-PO token. The number of the amount of XYZ-PO depends on the predetermined exercising price: Amount=USDT injected/Predetermined exercising price.
But anytime before the end of this year, there are again 4 things that the holder of the XYZ-PO token can do:
1. He could exercise the put option by injecting back the XYZ-PO token and the same amount of XYZ to get back the corresponding USDT according to the predetermined exercising price.
2. Keep this token in his Chainge app or send it to others in the same way they do with other any tokens.
3. Sell the put option token XYZ-PO in the Options DEX market for the XYZ-PO/USDT pair when he feels price of XYZ-PO is good enough
4. Add liquidity to the Options DEX market in the XYZ-PO/USDT pair.
Why should a project list an option?
1. Project teams or companies can write call options to motivate employees and communities to promote their projects.
2. Project teams or a companies can write call options and sell their token at a higher price.
3. Project teams can write put options to show their confidence in the project to the token holders.
4. Project teams can write put options to buy back tokens at a lower price.
5. Last but not least, Chainges’ 400 k users will become your users.
Let’s use an example to explain this thoroughly
There’s a project generically named “Project XYZ”. The current price of 1 XYZ is 1 USDT. The project team write call options whose exercising price is let’s say 2 USDT. Which means they are confident that their token will reach that price.
Then the project team could send XYZ-CO to employees or community members for free. De facto the project team is sending them the option premium. Then all employees or community members will do everything they can to help the project or promote it to make the price move up, because the more price moves up, the more profit they could earn. If the price never reaches 2 USDT by the end of the year, the project team doesn’t loose anything anyway.
And of course, the project team could write call options and put it up to auction or the Chainge Options DEX to sell. If the token price of XYZ never reaches 2 USDT by the end of this year, the USDT the project team gets from selling call options is pure profit. However, if the token price of XYZ moves up to more than 2 USDT, it means the project team will be selling XYZ at 2 USDT which is much higher than the current price. (1 USDT).
So, let’s take the same Project XYZ with a current token price of 1 USDT. The project team writes put options whose exercising price is 0.5USDT.
No matter if you sell it or send it to your community for free, your community will believe it’s safe to buy your project token XYZ, because the put option implies that the project team actually commits to buying the XYZ token at 0.5 USDT.
As long as the XYZ price never moves lower than 0.5 USDT by the end of the year, the option premium which the project team gets from selling put options in the Chainge Options DEX is again pure profit.
But even if the price drops lower than 0.5 USDT, and the holders of put options choose to exercise the put options, it only means the project team has to buy XYZ at 0.5 USDT which is lower than the current price.
What benefits do options bring to retail traders?
1. The volatility of an option (both call options and put options) is higher than its underlying token, but they are highly correlated. So it would be much more profitable to trade options than to trade the underlying tokens if the price moves in a direction that’s in your favour.
Let’s assume the current token XYZ price is 1 USDT, the call option exercising price is 2 USDT & the call option premium is 0.02 USDT.
When the XYZ price moves up, the option premium moves up as well. When the XYZ price moves up to let’s say 2.2USDT, the call option premium will be no less than 0.2 USDT (usually it’s higher), opening the door to risk free arbitrage opportunities. You could find that when XYZ has a 2.2x price pump, the call option has a10x price pump. And then if the XYZ price moves up to 2.4 USDT, which is only less than 10% above 2.2 USDT, the option premium would be no less than 0.4 USDT, which means it doubled its value.
2. Although trading options is more profitable than trading underlying assets when the price moves in a favourable direction, it is a lot like margin trading in CEXs. However, in margin trading, if the price moves in a direction that’s not in your favour, and you do not meet the margin call, the CEX can close out any of your open positions in order to bring the account back up to the minimum value. This is known as a forced sale or liquidation. That’s the end of your position. Even if the price moves back to in your favour later, you won’t get anything from it, because your positions were forcibly closed.
Trading options is a different story: even if the price moves in an unfavourable direction, as long as it bounces back before the end of the exercising deadline (the end of this year), your previous loss will be covered.
3. Retail traders could buy put option as a kind of insurance or protection of their investment. Let’s use the same example to explain this. If token XYZ current price is 1 USDT，put option exercising price is 0.5 USDT, put option premium is 0.01 USDT. Now a retail trader is holding 10K XYZ token, current total value of the XYZ token is 10K USDT, he could use 100 UST to buy 10K XYZPO in Chainge options DEX to prevent the price of XYZ drops to lower than 0.5 USDT. In this way, it is just like he buys an insurance to make his loss of the investment would be no higher than 5K USDT，because any loss higher than 5K could be covered by the profit by holding XYZPO.
4. Retail traders could also write call options or put options to sell on the market if they feel the option premium is insanely high. Using the same example, let’s assume XYZ token’s current price is 1 USDT & the call option exercising price is 2 USDT. When XYZ price moves up to 2.5 USDT, if the call option premium is much much higher than 0.5 USDT (eg: 1.5 USDT), they could write call options by themselves by injecting XYZ in the smart contract and sell them in the Chainge Options DEX. If the option premium drops to a reasonable level, he could buy back to lock the profit and prevent his XYZ in the option smart contract from being exercised. Or, alternatively if the XYZ price drops below 2 USDT later, they don’t even need to buy back the XYZ-CO because no one will exercise it. Same goes for put options.
Watch the video playlist below (or check it out on our youtube channel) with some Options walkthroughs to help you get started.
🔥 Important info!
- The APYs for the options liquidity pools can be found here: https://www.chainge.finance/info/pool. The due date for all options is dec 31st 2021.
2. The option exercising fee rate is 1%
- for call options, like FSN-CO, users need to use USDT to exercise call options, so they need to pay 1% more in USDT to exercise them
- for put options, like FSN-PO, users need to use FSN to exercise put options, so they need to pay 1% more in FSN to exercise them
And so Chaingers, we conclude our brief overview of the spectacular Chainge Options DEX. But no worries, this is just the beginning. We’ll be back with more explainer videos, use cases and articles about this one of a kind feature, guaranteed to rock the crypto world to its core. Needless to say, soon enough, meaning THIS WEEK, everyone will start seeing the astounding potential behind the Options DEX — from projects to retailers. Because not only does it open infinite financial possibilities but it grants people access to a whole market, which is at this moment, nothing short of mind-blowing.
